STAMP DUTY PAYMENT

Evening Star, Issue 22891, 24 February 1938, Page 20

STAMP DUTY PAYMENT

QUESTION OF LIABILITY COMPANY !N LIQUIDATION JUDGMENT FOR PLAINTIFF The question as to whether Butterworth Bros. Ltd., which went into voluntary liquidation in May. 1931, and has since existed only for _ the realisation of its assets, has been_ liable for the payment of stamp duty in the years since its liquidation, has been settled by His Honour Mr Justice Kennedy, who has given his reserved judgment in favour of the plaintiff. The case, which was heard in July last, was one in which Butterworth Bros. Ltd. proceeded against the Commissioner of Stamp Duties for a declaratory order. At the hearing, Mr N. W. 'Allan appeared for the plaintiff company, and the Crown Solicitor (Mr F. B. Adams) for the defendant. The text of the judgment is as follows

“ This is an application made with the consent of the Crown, for a declaratory order under the Declaratory Judgments Act, 1908. In so far as questions of ‘fact are involved both parties joined in inviting the court to determine them. The question involved is, ‘ Is it obligatory for the plaintiff company to take out an annual license and to pay the annual license duty prescribed under sections 184 to 188 of the Stamp Duties Act,: 1923, (a) since the company went into voluntary liquidation, and (b) since the company ceased to carry on the businesses mentioned in sub-sections' (b) and (c) of clause (2) of the Memorandum of Association of the company, although the liquidators have been unable to dispose of the freehold and leasehlod premises and have been obliged to let such P l *®" jnises on short tenancies pending the sale thereof.’ “ The company took over a business confined exclusively to the trade of softgoods merchants and warehousemen and manufacturers of softgoods sold and dealt in by warehousemen, and itself carried on business in Dunedin, Christchurch, Auckland, and _ in Invercargill. On May 4, 1931, the company went into voluntary liquidation. The liquidator thereupon closed down the Auckland warehouse and opened the warehouses at Dunedin, -Christchurch, and Invercargill to the , public. The warehouses so remained , open ■ as follows Christchurch, until August 31, 1931; Invercargill, until May 31, 1931; and Dunedin, until October 15, 1932. The stock-in-trade isas then sold by public tender. “ The premises upon which the company carried oh business at the date of liquidation were (a) a warehouse leased in Auckland, (b) a warehouse upon freehold land in Christchurch, (c) a warehouse upon freehold land in Dunedin, (d) premises used as a warehouse held upon lease at Invercargill. These premises were, prior to November 20, 1932, offered for sale by the liquidator, but purchasers were not found. Subsequently the Dunedin premises were sold on December 3. 1935, and it was stated that the Christchurch premises had since been sold. “ No portion of the Dunedin or Christchurch warehouses had been let prior to the liquidation. Part of the ground floor of the Dunedin premises was let on a monthly tenancy from April 30, 1933, until November 30, 1935, return-, ring a rent of £591. For the Christr church premises 2from March’: J, 1933, •until May 20, 193S|, a sum of £ll9 14s 2d was returned by way of rent from weekly or daily lettings. The only portion of the Invercargill premises let prior to liquidation .was a small detached shed which had! been let since 1925. “ The position of, the, leaseholds was as followsßefore the liquidation the net profits at Auckland were not sufficient to pay outgoings, and the directors restricted operations at_ Auckland with a. view to ultimate, liquidation. They closed part of the warehouse and endeavoured to make, arrangements to surrender part of th‘e lease, but, being unsuccessful, to reduce the loss they sub-let part of the premises. Between the. date of the liquidation and November 20, 1933, a sum of £328 7s 2d! was obtained by way of rent from sundry

tenants of portions of the Auckland premises. The rent received as from November 20, 1933, was approximately £269 16s Bd. Portion of the premises had been sub-let from May, 1928, to May, 1930, at a rental of £22 17s 2d per month, and from May, 1930, to June 24, 1932, at a rental of £23 5s lOd per month. A further portion was sub-let from January, 1930, to May 19, 1931, at a rental of £5 8s 4d per month. The lease expired on December 31, 1935. The rents were not sufficient to ipay outgoings. “ The whole of the premises at Invercargill, except a small shed not suitable for its purposes, was occupied by the company prior to liquidation. Thu leasehold could not be disposed of by sale, and it was stated 1 in the joint affidavit of the liquidators that the liquidator had arranged to sub-let the leasehold for the residue of,the term of the lease at a rental which resulted iu au annual loss of £139 Is fid, and finally the liquidators arranged to pay a purchaser the sum of £75 for the acceptance of the transfer of the lease and to pay the landlord £l4O in respect of the non-performance of the covenants of the lease. A supplementary affidavit sets out particulars of lettings from the date of liquidation and the rents received, and those details need not be repeated in this judgment. “ Payments of annual license fees have been made in respect of each of the years ended December 31, 1932, and 1933. No payments have been made in respect of the years ended December 31, 1934, December 31, 1935, and December 31, 1936. It was conceded that no duty was payable in respect of the year ended December 31, 1937. Section 12 of the Stamp Duties Amendment Act, 1926, provides that, ‘lf in any case not provided for by section 48 of the principal Act the Commissioner is satisfied that any duty has (whether before or after the passing of this Act) been paid under the principal Act, of any Act thereby repealed, in error, or in excess of the amount properly payable, he may, on application made at any time within three years after the payment of that duty, refund ‘the amount thereof or the amount of the excess, as the case may be to. the person by ; whom it was paid.’ It was said that, in the absence of anything in the nature of an application for the year 1932, the Commissioner could not, in any event exercise the power given to liim by the amendment quoted in respect of the year 1932, but that he could treat a payment made under protest for the year 1933 as an application. Admittedly ’no liability was shown for the year 1937. The years 1933, 1934; 1935, 1936, therefore require to be considered. “ Section 184_ of the Stamp Duties Act, 1923, provides that ‘ It shall not be lawful for any company, whether incorporated in New Zealand or elsewhere, to carry off business in New Zealand, save in pursuance of an annual license issued By the Commissioner under this Act.’ For every such license the company must pay to the Crown a license duty at the rate mentioned, and the license shall, upon payment of that duty by the company, be issued to the company accordingly. Every such license is to he for the term of a year commencing on January 1 and ending on December 31: s, 186. The question then is v did the_ company within a year, in which the license fee has been paid or has been claimed, carry on business ? It is clear that until October, 1932, the company was carrying on a certain business. It was not carrying it on with a view to its continuance, but with a view to liquidation, the stock not being replaced. There is no essential difference between selling wholesale and met replacing stocks and selling retail and not replacing stocks. * In each case the company carries on a business, the one of wharehousemen and. the other a business approximating to that of a retail shopkeeper.’’ After quoting legal authority, the judgment continues;— “ It was submitted that the cojnpany ceased to carry, on business at liquidation, and that if business was carried on it was carried on by the liquidator, and,mo duty was payable subsequent tp the liquidation. 1 think that the business which a liquidator may carry on in liquidation with a view to a beneficial winding-up is the business which the company was carrying on. The 1908 Act applies; for the company had gone into .liquidation before the Companies Act, 1933, had come into operation: see s. 384 (4) of, the 1933 Act. By section 195 of the 1908 Act the official liquidator had power, with the consent of the court, to do the following things: —‘ (b) Carry on the business of the company so far as is necessary for the beneficial winding-up oLthe same; (d) do all Acts and execute in the name and on behalf .of the company all deeds, receipts, and other documents and foi that purpose use when necessary the company’s seal; and (i) do and execute all other things necessary for windingup the affairs of the company and distributing the assets.’ Section 222 provides that, ‘ Where a company is wound up voluntarily it shall from the date ot the commencement of such winding-up cease to carry on its business except in so far as is required for the beneficial winding-up thereof; but its corporate state and all its corporate powers shall, notwithstanding its regulations provide otherwise, continue until the affairs of the company are wound up. -Section 224 provides that on the voluntary winding-up of a company:— (a) Liquidators shall be appointed for the purpose of winding-up the affairs of the company and distributing its assets; (f) upon the appointment of liquidators all the powers of the directors shall cease except in so far as the company in general meeting, or the liquidators, sanction the continuation of such powers; (h) the liquidators may, without the sanction of the court, exercise all powers by this Act given to the official liquidator.’ . “ If after the_ winding-up commences business is carried on it is carried on by the company, not by the directors, but by the liquidator. The Companies Act, 1908, section 222, provides that where a company is being wound up voluntarily it ceases from the commencement of the winding-up to carry on its business ‘ except in so far as is required for the beneficial winding-up thereof.’ The liquidator carries on the business, but it is the business of the company, and whatever the liquidator does in carrying it on he does in the name of and in. behalf of the company.”

A quotation from a previous judgment was . given, and the • concluding part of the present judgment states: — “ The inference I draw from the facts stated is that the company never carried on" the business of property letting or of landowners, and that the letting of property at Auckland and Invercargill prior to liquidation was merely incidental to the business of softgoods merchants. The subsequent letting by the liquidator, after he had sold the stock, of premises which he tried to sell and could not sell, and the subletting of the leasehold was not a carrying on any business which the company had carried on, nor was the company in any real sense carrying on business. The result is that no license duty was payable, in my view, as from the year ended December 31, 1932. The defendant will pay the plaintiff for costs the sum of £ls 15s and disbursements.”